Dutch risk managers warn colleagues to prepare for sustained hard market

Leading Dutch risk managers have warned fellow risk and insurance managers across Europe that, in their view, the commercial market is definitely hardening and is likely to continue. There is also rising concern about the appetite of the leading insurers for global programmes business. The risk managers said the best response to the hardening market is to continue in the most transparent way possible and effectively continue to “do the right thing” and manage internal expectations carefully. Risk and insurance managers who have continued to focus on good loss prevention and improvements in risk management practices, despite cheap insurance in the soft market, should be fine, agreed the group. Those risk and insurance managers who allowed themselves to become lazy and assume that the soft market would carry on forever and cheap capacity would be offered regardless of the quality of their risk, should expect a nasty surprise, said the Dutch risk managers. The comments were made by a group of Narim committee members led by president Adri Van der Waart, corporate insurance manager of Arcadis, as they met Commercial Risk Europe yesterday in Rotterdam, before the association’s annual conference this week. The risk managers, who represent some of the biggest multinational firms based in the Netherlands and the US, were asked how many Narim members had actually experienced a hard market before and how they should prepare and respond for this market shift that has not taken place for about 15 years. First, the risk managers agreed that the market is hardening and it feels like this time it will continue. The risk managers agreed that perhaps only 50% of Narim members have actually been through a hard market before, so for the other half this will be a new experience. Younger Narim members will no doubt be calling on their more experienced colleagues for help and advice during the Narim congress this week. “Yes, it’s hardening. I have been managing expectations for a hardening internally for sure,” said one Narim committee member. “Natural catastrophe lines are definitely hardening but it does still very much depend upon your specific business, sector and loss experience,” said another. “Generally, you have to say its hardening but it does still depend upon the line of business and your sector. Construction companies in the Netherlands do have a problem again this year. The approach of the London market is not good because the London insurers are looking for 12% increases regardless of your risk experience because of Grenfell Tower,” added another risk manager with a Netherlands-based multinational. “How to react? If you did not do all the health and safety and loss prevention work required over the last ten years because of the soft market, then you have a problem now because the leading insurers are looking to trim their books. You need to show that you have made progress with sprinklers and the like over the last three years. If you have simply been riding the market over the last few years, then you face a hard time now,” commented another risk manager with a major multinational. The Narim members are also concerned about limited choice among those insurers that are genuinely willing and able to lead a global programme. Apart from mergers and acquisitions such as ACE’s of Chubb and AXA’s of XL, there have been worrying corporate changes, including Zurich’s decision to merge its Global Corporate unit into the broader commercial operation at the end of 2016. AIG has significantly reduced limits in loss-hit commercial and corporate lines as it seeks to return to underwriting profit. Allianz Global Corporate & Specialty and Swiss Re Corporate Solutions have been singled out by their parent groups for corrective action in recent comments made by group executives during first-quarter results calls with analysts. “There are now only five or six insurers that can genuinely lead a global programme and you have to say that of these, two struggle to offer the network needed to serve a multinational programme. You need a good global network that can work with captive reinsurance companies backed up by a good claims handling process. If you do not have that, then you are not capable of leading a global programme,” commented one risk manager from the agricultural sector. “We have businesses in over 60 countries. If you have to deal with lots of insurers in all these territories, it is a nightmare. Therefore, the choice is very limited. The same can be said for the choice of brokers, which is now down to only three,” added another risk manager. One of the participants in the discussion said he is also concerned about the ongoing impact of Solvency II on insurer commitment to the larger corporate market, because it effectively demands more capital than simpler lines of business. “If you look at the insurers’ underwriting models, they are changing. They are making solvency-based decisions and it is not clear to us what is driving the decisions. Where you may have been offered limits of $50m-$100m, you may now only be offered $25m because of this. It is already happening in financial lines and will now happen in general liability,” concluded a risk manager for one of the biggest privately held groups in the Netherlands.

Dutch risk managers warn colleagues to prepare for sustained hard market

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